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Fed and ECB policy expectations weigh on euro focus

Danske Bank said September FOMC minutes showed no major surprises, with all participants backing a 25 bps hike and most expecting another by year end, while euro area focus turns to ECB meeting minutes.

Reported · Written up by our desk · Central Banks

Danske Bank research highlighted that September Federal Reserve meeting minutes reinforced expectations for another Fed rate increase by year end, citing officials concerns about upside inflation risks, according to FXStreet.

The research team said all participants supported the 25 bps hike at the September FOMC meeting, and most saw a further hike as appropriate by year end, with markets reacting modestly and the probability of an October move easing slightly.

On the euro side, Danske Bank pointed to rising European government bond yields, with France a key driver, and noted that upcoming ECB meeting minutes will be closely watched.

Despite softer rhetoric from policymakers, the bank expects the ECB to keep a tightening bias, as US yields moved higher initially before giving back some of the earlier gains during the day.

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